Savings accounts, CDs and Treasuries yield next to nothing. So smart dividend investors are looking elsewhere in search of that ever-elusive yield. In our hunt for passive income, we uncovered 5 high-yielding stocks every income seeker should consider this year.
Last week, we wrote about 10 wide-moat, undervalued dividend “kings” for 2011, which you can read here.
Today we’ve listed a few other names that should be on every dividend investor’s radar. Here they are:
Verizon (VZ): Verizon is an extremely well run business that generates a ton of cash; cash that it uses to pay a hefty 5.41% dividend yield and quickly pay off the debt used to fund the Alltel acquisition. This market leader (the company serves around 94 million subscribers or approximately 25% of the US population) already has an extremely loyal consumer base, and with Apple (AAPL) iPhone pre-orders doing gangbusters thus far, we think those relationships will only grow stronger. While we think Verizon shares are approaching fair value, we believe Apple shares, on the other hand, are overvalued, as we outlined here.
Abbott Laboratories (ABT): This pharmaceutical powerhouse yields 3.85% and has a history of raising its dividend. The company's portfolio of patent protected drugs, along with its excellent nutritional and diagnostic groups and its history of strategic acquisitions, have dug ABT a wide economic moat, which is one of the reasons we think Warren Buffett might buy this stock.
Home Depot (HD): Another Buffett favorite, Home Depot is the world’s largest home improvement retailer. Home Depot operates over 250 stores outside of the US, but only a handful are outside of North America. The company has benefited greatly from Bob Nardelli’s replacement and current CEO, Frank Blake. Executive compensation is much more reasonable and the board of directors sports eight independent directors including corporate-governance consultant Bonnie Hill. Blake sold off most of the lower-margin HD supply business in 2007 and wound down the Home Depot EXPO design centers that were a distraction to the core business.
Going forward, we estimate sales growth of 5%, comparable to Lowe’s, with operating margins reaching 10% after several years relative to last year’s 7.3% as the company capitalizes on a revamped supply chain, merchandising and pricing automation. The company currently yields 2.58%, and we value shares at $45. Share price at the time of writing is $36.60. Another home improvement name we like is Lowes (LOW), though it has a slightly lower dividend yield at 1.79%. For our full valuation of HD and LOW, see here.
Deutsche Telekom AG ADR (OTC:DTEGY): Another telecom name on the list, DT is Germany’s incumbent telephone provider with operations throughout Europe and the United States (T-Mobile). The company's fixed-line networks serve 37.2 million voice lines and 15.9 million Internet access lines. And the company’s wireless business has 131.1 million customers. But what drew our attention to this name was the company’s 7.58% dividend yield, and DT’s joint venture with France Telecom (FTE) (one of our dividend “kings”) in the U.K, which should help margins in a difficult country. Shares trade at $13.61 at the time of writing.
Senior Housing Property Trust (SNH): SNH is a healthcare real estate investment trust (REIT) that owns over 320 senior living properties and medical offices throughout the United States. We like SNH both for its high dividend yield of 6.7% and the favorable macro-demographic trend of the broader assisted living industry. Political risks do exist in this space, so please do your own due diligence before investing in SNH or any of the stocks listed above. At the time of writing, shares of SNH change hands for $22.101